When you buy a home, your lender will require that you purchase homeowners insurance. What if you purchase a condo, though? Do the same rules apply?
The rules are similar, but slightly different. When you purchase a condo, you share everything except the interior portion of your condo. Because of this, you don’t need a standard homeowners insurance policy. Instead, the association holds a policy for everyone. It’s called a master condo policy. This policy covers certain items and your personal condo insurance will insure others.
We look at both in detail below.
Condo Insurance – What it Covers
When you purchase condo insurance, you get coverage for the interior components of the condo. The dwelling amount must be enough to cover the cost to rebuild just the interior structure of the condo. Basically, it covers from the walls in – it does not cover anything outside the interior walls.
Master Condo Policy – What it Covers
The master condo policy that the association holds covers the exterior walls and everything beyond it. Let’s say the roof of the condo was damaged in a storm. That would be the responsibility of the master condo coverage. If there was a fire that only affected the interior walls of your unit, your condo insurance would be responsible for it.
The Types of Necessary Coverage
Because the needs and coverages of a condo are different, you need different types of coverage. They are as follows:
- Liability coverage – You want enough coverage to protect you in the event that someone was hurt inside your condo. If someone were hurt on the common areas of the development, though, the master policy would cover it and you would not be responsible.
- Personal coverage – Your condo policy must cover your personal belongings. Much like a standard homeowners insurance policy, you may need riders for things like jewelry or electronics. Check with your insurance agent regarding the maximum coverage per item to determine if you need a rider.
What is Homeowners Insurance?
You might think condo insurance and homeowners insurance are the same. While they do similar things, like protect you in the event damage from natural resources or someone getting hurt on your property, homeowners insurance has greater coverage.
As a homeowner of a single unit property, you are responsible for all aspects of the home, both the interior and the exterior. This means if your roof suffered damage in a storm, you would have to make a claim on your homeowners insurance. There isn’t a master policy because you don’t share the common areas with anyone else. You own the exterior components of your home and all areas that surround it on your land.
Condo insurance is mostly protection for your personal belongings. Anything that has a risk of being stolen or damaged needs coverage. It also protects you in the face of disaster, should someone get hurt or you hurt them and they decide to come after your home.
Other than your personal belongings and the interior of your condo, the association is responsible for the rest. It is part of the reason you must pay association dues. It helps the development pay for the insurance and keep reserves on hand to help fix any issues that arise throughout the development.